Why do banks underserve SMEs? Insights with Xavier Gomez, July 2019

Why do banks underserve SMEs? Insights with Xavier Gomez, July 2019

What is your background briefly ?

Xavier Gomez is founder & COO of INVYO, a SaaS company that uses machine learning and Natural Language Processing (NLP) to help financial institutions see tomorrow’s opportunities in Fintech. He is also Co-Editor-in-Chief at Invyo Insights powered by INVYO, a global provider of Fintech insights and analysis. As a banker, Xavier has been sharing his vision of the sector with industry pioneers over the past 18+ years.

He holds a certification from the Massachusetts Institute of Technology (MIT) specialization Fintech (2016) and is a graduate of HEC Paris in Private Equity (Leadership Executive program in Private Equity in partnership with AFIC – French Association of Investors for Growth) in 2017.

In 2000, he started his career at Credit Suisse (private banking) in Paris as a portfolio management consultant (2000-2004), selling structured products in Zurich, Switzerland (2005-2007), assistant vice president in charge Investment Consulting in Paris (2007 – 2008), Vice President in charge of Investment Consulting (2009 – 2013) in Paris, Director in charge of investment and trading in Paris and Treasurer of Credit Suisse France. From 2016 to 2018, he became Global Senior Portfolio Manager and Asset Allocator at Pictet & Cie.

He is an expert in banking, finance and economics as well as banking and digital transformation.

He is interested in the digital economy and especially in innovations in the field of finance (Fintech), an area in which he sometimes writes some articles in the specialized media. He acts as expert to talk about Fintech TV. Moreover, he is speaker in different global fintech conference around the world.

Honored to be named Top #influencer in #Europe ?? by @Onalytica:

N°11 Top #Blockchain influencer
N°16 Top #fintech influencer
N°21 Top #innovation influencerhttps://t.co/D2CtCHAxTJ #financialservices #digitaltransformation #leadership #influencers #community @wef #PFF19 pic.twitter.com/YmX4Jn5Bcy

— Xavier Gomez (@Xbond49) February 6, 2019

Does it seem like a logical background to what you do now

I consider my background logical because I am banker since 2000 and  was trained to megatrends. Finance is one the most important megatrend because it impacted the rest of economy.  I am faced numerous financial crisis that provide my a deep professional experience and the limits of financial sectors. This is reason why I questioned myself and decided to back to school to sharpen my skills about private equity and Fintech in MIT.

Fintech is the future of commerce and financial services, in particular XXI century. The digital transformation will change drastically financial services. The competition of Tech Giants becoming Non-Bank banks is the biggest challenge for traditional banks.

1 min pitch for what you are doing now?

I am co-founder of INVYO. It is the first market intelligence platform in the Financial Services in Europe powered by Machine Learning. The company offers a SaaS solution that leverages proprietary Big Data analytics and Natural Language Analysis (NLP) technologies to help financial institutions drive their digital transformation strategy. INVYO provides its clients with predictive analysis, sourcing, market intelligence and competitive intelligence tools, and conducts targeted analyzes accessible on request or from its research portal. The first one-stop-shop for all the market data in your sector.

The usual data provider that provides its customers with a standardized platform (not scalable or customizable). The usual data is also transactional data (mainly focused on one activity). Also, teams still have to spend time looking for the data within the database. The heart of Invyo’s activity is rather centered on the contextualization of the data. In other words, thanks to our tools, we are able to share actionable data that adapts to the uses of your teams.

What are the pain points for entrepreneurs with their banks?

Small and medium-sized enterprises (SMEs) form the backbone of many economies around the world. Representing one-fifth of global banking revenues, SMEs generate around $1 trillion of annual revenue for banks—a pool expected to grow by approximately 7% annually over the next seven years.

I was impressed by the development of entrepreneurship this last five years in developed countries. Due to legacy of social-economic system, it is clearly a pain to be an entrepreneur and get from banks : Credit cards, Banks overdrafts, banks loans or mortgage and commercial mortgage…

The profits of SME-focused banks have traditionally lagged behind those that specialize in other customers, often because of highly varied credit quality in the portfolio. Finding the optimal balance between providing a great customer experience and managing the cost to serve has also proven to be difficult. As a result, many banks have not prioritized SMEs—forsaking the vast potential value and leaving many SMEs feeling that their needs are ignored.

But now, new customer propositions and better service models enabled by technology are creating opportunities for much more lucrative returns. Fintechs (such as Revolut, Qonto, Solaris Bank) are entering the business, as are the big tech companies (such as Amazon), with innovative service models that reduce costs and increase revenue.

According to EY, the top barriers to bank finance for ‘would-be borrowers’ are :

? Discouragement (47%) (put off by bank)

? Assumed they would be turned down and so did not apply (30%)

? Process of borrowing (typically the hassle or expense) (29%)

Why do banks underserve SMEs?

Whilst banks have traditionally dominated SME finance, in the years following the financial crisis, we have seen SMEs turn to a broader range of suppliers for their finance needs. Following the financial crisis and the subsequent increase in regulation, banks have implemented stricter lending requirements, deterring many SMEs from applying for funding and leading to a year-on-year reduction in the number of approved loans

How can you improve the financial services provided to SMEs ?

Financial institutions must choose what role they want to play in the new world of open APIs. Options exist to create an API-enabled ecosystem market in the SME finance value chain, providing innovative third-party products and services to SME customers

What is the position of EU regulators in relation to this?

The EU published numerous report denouncing the bad banking services provided to SMEs. During the last three years, EU facilitated innovation counting on the strength of all FinTech firms and put in place some rules to organize competition between Banks and Fintechs in Europe. The objectives of EU are simple : reduce costs and improve customer experience in order to fuel european economy and create the champions of tomorrow.

How can people find out more about you & your work?

People can follow me on twitter and linkedin profile but also on Invyo Insights (Website, Twitter, Linkedin) and Invyo

Anything else you’d like to add / we should have asked ?

The future of Fintech is challenging to chart over the next decade. It will strongly depend on dynamic environment covered by customers experience, Fin & Tech connection, data monetization, the blockchain technology and regulation. SMEs suffer of poor service client and customer experience provided to SMEs (Small and Medium Enterprise) by banks about banking services.

I strongly believe that the rebundling opportunity in SMEs banking services sits at the intersection of corporate financial software and finance. Banks deserted SMEs segment because it was not as scalable as consumers or big corporate. The exit of the banks, under pressure of regulation, enabled networked marketplaces to unbundle SMEs services.

The issues are: Will Fintechs succeed ? How should banks react? Banks need to react. Some will respond appropriately. Many established financial services players are already investing heavily into the Fintech sector. Who dares win !

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